1) Indicate whether each of the following statements is true or false.
1>Pro forma financial statements must be prepared near the end of the budgeting
process because they are affected by each of a company’s budgets
2>Budgets are not easy to adjust for changes in assumptions or conditions
3>Once the master budget is prepared, company managers should not review the budget
again until the end of the period covered by the budget
4>Budgets are usually prepared using spreadsheet software
5>A pro forma income statement provides an estimate of a business’s expected
profitability for the budget period
2) What are examples of events that give rise to contingent liabilities?
3) A capital investment has an internal rate of return of 12%. How would you determine
whether this is an acceptable investment or not?
4) Name three examples of property, plant and equipment.
5) What are pro forma financial statements, and what pro forma financial statements is
a business likely to prepare?